How many times have you heard me say that profits are the mother’s milk of stocks, business success, and job creation? Well, they remain the story of the day.

S&P earnings look to rise about 45 percent in the first quarter, with earnings estimates pegged at a 9 percent gain in April to lead off the second quarter. Meanwhile, Chevron reported better-than-expected profits this morning, on top of yesterday’s positive results from Conoco, Motorola, and Starwood Hotels. (Stocks are taking a breather this morning, after posting their best rally in two months yesterday.)

Look, profits are the purest and most efficient form of stimulus to the economy. They are vastly greater than oversized government spending and borrowing. Profits improve our future outlook, while borrowing and spending undermine it.

Investors need to remain vigilant of looming tax hikes on investors and successful earners. But right now we’re witnessing some big numbers in retail sales, business investments, ISMs, and the aforementioned profits. All of this is driving stocks higher on the shoulders of a V-shaped recovery in the U.S. and — let me add — Asia.

I prefer Asia to Europe. European countries like entitlements that are bankrupting them. Asia likes entrepreneurs, capital formation, and free-market capitalism. There are even some new free-trade agreements springing up right now, which will spur even more growth.

As for Europe, why in the world should U.S. taxpayers — via IMF bailouts — finance the bankrupt entitlement state of socialist Greece or any other EU country? After all, the IMF is largely funded by American taxpayers. I’m quite sure investors will revolt against the idea of bailing out Greece or the EU’s massive social-welfare failures. This is a key political point with financial and economic overtones.

Right now investors face a V-shaped-recovery theme at home and the serious debt troubles plaguing Greece, Spain, Portugal, and perhaps other countries in Europe. According to reports, the IMF/EU financial-rescue package is now approaching $800 billion. Will there be contagion? That’s the billion-dollar question.

And will Germany sign off? No one knows for sure. I think it probably will. But what I’m really interested in here is whether there’s going to be strict conditionality attached to this bailout. The socialist Greek government cannot be trusted. It may very well turn around and spend the money.

But let me echo another thought. Distinguished investor Ken Heebner told CNBC on Wednesday that the increasingly strong U.S. recovery is independent of Europe. I totally agree. So stock market investors should keep their eyes on the V-shaped recovery. So far, this includes a 76 percent increase in first-quarter operating earnings for the S&P 500. That is huge.

On top of that, we’ve been witnessing big ramp-ups of retail sales, industrial production, and business investment spending.

Now, I do acknowledge a recent jump in gold prices. While the precious metal shed a few bucks today, it did rise to a year-to-date high of $1,167 yesterday. I believe gold could be a warning signal and currency substitute in a world of excess spending and debt. It also could be saying that global central banks — including our own Federal Reserve — are too weak-kneed in taking back their massive money-printing.

Is gold saying, “A pox on all your houses”? “You’re all Greece now”? Perhaps, especially in light of the Fed’s ultra-wussy FOMC statement this week. It totally ignored booming commodity prices and the V-shaped recovery. The Fed still refuses to offer any sign whatsoever of an exit strategy from its ultra-easy, free-money policy.

What do I want? I want a dose of cowboy monetarism. I want to see the Fed, for once in its lifetime, surprise Wall Street traders by pulling the trigger just a little bit faster. It ought to take a cue from Kansas City Fed head Tom Hoenig. Of course, Mr. Hoening dissented once again. It’s time to cowboy up.

Tuesday, April 27, 2010

With all eyes trained on the financial-regulation bill and the Goldman Sachs hearings, I’d like to keep hope alive by focusing attention on the V-shaped recovery. You may have seen yesterday’s New York Times front-page story: “From the Malls to the Docks, an Economic Recovery Boom Set to Roar.” Of course, I agree. As you know, this has been a key theme of mine in recent months.

Now, it may not last forever. There is a big-government-tax-hike wall standing in front of us next year and beyond. But tea-party politics may tear down that wall in the November midterms. So keep hope alive.

But as far as this year goes, I’m still highlighting the blowout profits and trillions of dollars of capital gains coming from the stock market rally. Profits and capital gains are the purest and most effective economic stimulus of all. Profits are what matter.

Moreover, the stock market may still be undervalued. A new report suggests that S&P companies may earn almost $86 a share in the next year. With today’s S&P index trading just north of 1,200, $86 bucks a share is only 14 times future earnings. And that, at least theoretically, makes stocks the cheapest they’ve been since 1990 (except for the months directly following the Lehman meltdown).

Another key point on the stock market rebound: Did you know that bull markets tend to last about four years on average? They can last as long as five to six years, and they can be as short as a year. But they’re usually about four years. Are we in the early innings of a bull-market run?

And while bank stocks have been clocked recently, I don’t think the proposed financial legislation is going to damage profits to the extent that the banks can’t recover.

To be perfectly honest here, as much as I love to dig into all the money-politics issues -- including the financial-reform bill -- I’m much more interested in these big profits and capital gains. This V-shaped recovery is the most important item on my radar screen. It’s the single-biggest investor issue out there right now. I don’t think the bull market in stocks is over yet.

Again, regarding taxes and regulations, I’ll warn about next year. But frankly, I think the prosperity theme is issue number one.

Friday, April 23, 2010

The worst thing I’ve seen recently, by far, is the Senate Budget Committee’s new mark-up to jack the dividend tax from 15 percent all the way up to 40 percent. What in the world are these people thinking?

This is a direct tax attack on capital, jobs, the stock market, and entrepreneurs. It would take effect next year, in 2011, which is not so far from where we are right now in late April 2010.

This tax attack would come on top of a scheduled capital-gains tax hike. And then you’ve got a potential hike of the alternative minimum tax as well as a hike of the inheritance/death tax. And there’s more: In his Cooper Union speech yesterday, President Obama renewed the call for a new bank tax. Remember that one? You thought it was dead? Nope. It’s still alive.

Finally, you’ve got all the chatter about a European-style value-added tax, or VAT.

This is all terrible for economic growth. Whatever happened to the tea-party Contract from America, which calls for constitutional limits on taxing, spending, and ultra-big government?

Washington is not listening.

Incidentally, a new Pew poll reveals that a staggering 80 percent of Americans do not trust Washington. What a shocker. (Read Dan Henninger’s great column in yesterday’s Wall Street Journal on this very important point.) Is anyone really surprised at this poll’s results?

Again, what happened to the tea-party call for limited government, limited spending, and limited taxation? That’s what I want to know.

Thursday, April 22, 2010

Billionaire hedge-fund manager John Paulson has received quite a bit of press lately, all arising from his involvement in Goldman Sach’s 2007 Abacus deal which netted him a king’s ransom of $1 billion. Say what you will about the man, Mr. Paulson is a terribly smart investor — one of a small handful who accurately predicted the housing market’s turn with highly successful bets against mortgage securities.

Now, what is less well known about Paulson is that he has turned rather bullish on the U.S. housing market and the overall economy. In a conference call with investors yesterday, Paulson said he was concerned earlier this year about a potential double-dip recession. But he went on to say that he is “not concerned about that at all today. It’s more likely there could be a V-shaped recovery.” Whoa. Mr. Paulson, are you tuning in to The Kudlow Report each night? Of course, I have been discussing — at length — the various and key pieces of evidence that support a clear case for a V-shaped recovery.

Incidentally, Mr. Paulson also remarked that corporate earnings are coming in ahead of expectations, that there’s a vibrant credit market, and that the stock market is stronger. Yes indeed, sir.

Heck, I’ve never seen or owned a synthetic CDO. That’s above my pay grade. But I certainly agree with Paulson’s take on the economy. (Hat tip to my pal and economics professor Mark Perry of the Carpe Diem blog site. He’s been signaling Paulson’s call.)

And now for some worrisome news: While stocks did eke out small gains Wednesday, outside of Morgan Stanley’s 4 percent rise from a big earnings number, all the big banks got clobbered by an average of around 2 percent. The list includes Goldman, Citi, US Bancorp, JPMorgan, BofA, Wells Fargo, and State Street.

Why did the big boys get hit? Financial regulation is going to pass. That ain’t good for banks. First, it may put an end to proprietary trading for these boys. Second, it may squash their lucrative derivatives business. Third, it may take away their too-big-to-fail status.

So be on the lookout for some rocky moments ahead for the big boys on the road to financial reform. While this may be good news for U.S. taxpayers, it’s not necessarily so good for the nation’s biggest banks.

Another point on this bank bill worth noting: Sen. Blanche Lincoln’s derivatives legislation means trading will wind up moving to Chicago, which has much better infrastructure than New York. So, in a sense, you could actually call this a Chicago jobs bill. In the longer term, New York City will be very hurt by this.

Elsewhere, some good news: With 20 percent of the S&P having already reported, roughly 85 percent of the S&P companies have beat expectations. Guess what? If this continues, it will be the best performance since 1993.

On an interesting but somewhat unrelated note, the Treasury and the Fed have unveiled a new $100 bill with a lot of high-tech security embedded in it. Ben Franklin is still on the front, and it’s going into circulation next year. An interesting factoid about the C-note: It’s the highest denomination of all U.S. currency and has huge circulation around the world. Over the past 25 years, global demand has pushed these Benjamins up to $890 billion from $180 billion, with two-thirds circulating outside the United States. As for me, I’m still waiting for the new Ronald Reagan note.

But let me close with this key point regarding the V-shaped recovery: Rising corporate profits equals rising jobs in the future. If businesses are profitable, they will hire. Bank on it. After all, we witnessed such a steep falloff in employment because businesses were so unprofitable.

Again, I’ve never owned a synthetic CDO in my life. But I do entirely agree with John Paulson’s bullish call for a V-shaped economic recovery. I’m delighted to hear he shares my view.

Wednesday, April 21, 2010

I’d like to weigh in on this whole SEC securities-fraud action against Goldman Sachs. The feds have, of course, alleged that Goldman made materially misleading statements and omissions in connection with a synthetic collateralized debt obligation (CDO) that was structured by Goldman and marketed to investors.

This is all very complicated. And I know some very smart people lining up on one side saying the SEC’s fraud action is weak. And I know some equally smart people on the other side saying this is an extremely serious matter that will be followed by numerous other SEC fraud charges against other Wall Street underwriters.

Look, I’m not a lawyer. I don’t know how this lawsuit will eventually play out. But let me make a couple of simple, straightforward, points that may help inform regarding the question of hedge fund manager John Paulson’s involvement in the securities selection for the Abacus CDO, and whether this is a material fact that Goldman should have disclosed to investors.

Here’s a very important timeline of the securities-selection process that was made by ACA management, the portfolio selector. This is from the actual SEC complaint:

January 22, 2007ACA sends email to Fabrice Tourre & others at Goldman containing list of 86 RMBS, including 55 of the 123 selected by Paulson; 68 were rejected. This is very important. Goldman maintains that ACA was in fact the portfolio selector. ACA rejected 68 of Paulson’s recommendations. They accepted 55.

February 2, 2007After meetings with Paulson & Tourre, ACA emails Paulson, Tourre & others at Goldman a list of 82 RMBS on which Paulson & ACA concurred, plus 21 others. So at this point, they are in agreement on 82, but they insert 21 others.

February 5, 2007Paulson sends email to ACA & Tourre deleting 8 of the RMBS recommended by ACA and leaves the rest alone.

February 26, 2007After further discussion, Paulson & ACA agree on a reference portfolio of 90 RMBS for Abacus 2007-AC1.

Now, what I gather from all of this is that ACA management was most definitely the portfolio selector. There’s no question about it. This is Goldman’s single biggest defense in not mentioning hedge fund manager John Paulson’s name.

However, I’m looking at this and I’m thinking, with all these negotiations, all of this back-and-forth, that it’s quite clear that John Paulson played a pivotal role in the portfolio-selection process. That seems undeniable. So that raises the key question of whether Goldman Sachs’ decision not to disclose Paulson’s involvement was a correct judgment, or whether it was a material omission. It just seems to me that Goldman Sachs should have named Paulson in the offering circular for the CDO. They didn’t. Is it because they didn’t want investors to understand that this was a bear-market, short-the-bond CDO?

Second point: Some highly placed, senior Wall Street sources who have been deeply engaged in structured mortgage-based CDOs tell me that this CDO in question was weak and appeared designed to unravel quickly. They go on to say, in general terms, that this CDO constructed by Goldman Sachs lacked sufficient cash; its covenants were weak; and it afforded less investor protection than usual in order to provide higher yields. This troubles me enormously.

Creating something that’s designed to fail? Well, you know what? If it’s not illegal, it certainly appears unethical. So I must blame Goldman for this. Why sell it to customers if it’s going to fail? Why go there in the first place? What kind of brokerage service is this?

Now, there’s nothing wrong with creating a neutral security that will attract buyers and sellers. That’s called free-market capitalism. And the buyers and sellers do not have to know who the buyers and sellers are. But if, in fact, these Goldman CDOs were designed to fail, then there’s something seriously wrong with this system and it must be changed.

Whether Goldman lied about Paulson’s $200 million equity stake is another difficult issue. If they lied, then it’s a material misrepresentation and the SEC is dead right. But there are different opinions about this.

One final thought: Wouldn’t it be wonderful if Washington could somehow solve these issues without totally demonizing, demoralizing, and even destroying America’s great global banks? We need these banks for full-fledged economic recovery. We also need them for America’s full-fledged leadership in the global financial system and world economy. In other words, can we please figure out a way not to throw out the baby with the bathwater?

This is way too important a time for our recovering economy and financial system. Our future is at stake.

Friday, April 16, 2010

So much is being written in the mainstream media about who the tea partiers are, but very little is being recorded about what these folks are actually saying.

We know that this is a decentralized grassroots movement, with many different voices hailing from many different towns across the country. But the tea-party message comes together in the “Contract from America,” the product of an online vote orchestrated by Ryan Hecker, a Houston tea-party activist and national coordinator for the Tea Party Patriots.

With nearly 500,000 votes recorded in less than two months, this Contract forms a blueprint of tea-party policy goals and beliefs.

Of the top-ten planks in the Contract, the number-one issue is protect the Constitution. That’s followed by reject cap-and-trade, demand a balanced budget, and enact fundamental tax reform. And then comes number five: Restore fiscal responsibility and constitutionally limited government in Washington.

Note that two of the top-five priorities of the tea partiers mention the Constitution.

Filling out the Contract, the bottom-five planks are end runaway government spending; defund, repeal, and replace government-run health care; pass an all-of-the-above energy policy; stop the pork; and stop the tax hikes.

What’s so significant to me about this tea-party Contract from America is the strong emphasis on constitutional limits and restraints on legislation, spending, taxing, and government control of the economy. Undoubtedly, the emphasis is there because no one trusts Washington.

As I read this Contract, tea partiers are reminding all of us of the need for the Constitution to protect our freedoms. They’re calling for a renewal of constitutional values, including -- first and foremost -- a return to constitutional limits on government. The tea partiers who responded to this poll are demanding a rebirth of the consent of the governed. The government works for us, we don’t work for it.

All this makes me think of President Reagan, who never quite succeeded in gaining a constitutional amendment for a balanced budget, or for limits on spending, or for a two-thirds congressional majority for any new tax hikes. But throughout his presidency, and for many years before, the Gipper argued for constitutional limits on government, especially government spending.

And now this message is being echoed perfectly in the tea-party Contract from America. In effect, it picks up where Reagan left off.

The tea partiers, whom I call free-market populists, desire a return to Reaganism. In particular, their demands for a balanced budget (third plank), for restoring fiscal responsibility (5th plank), for ending massive government spending (6th plank), and for stopping the pork (9th plank) all underscore the populist revolt against runaway government spending, and therefore runaway government power.

There are mentions in the Contract of tax reform and stopping tax hikes. But it is pretty clear to everyone nowadays that the massive run-up in spending of recent years will inevitably result in an equally massive tax-hike movement -- that is, unless the spending is strictly curbed and reduced.

Yet the tea partiers don’t trust Congress to do this, so they want to bring in constitutional restraint.

A recent survey by the Brookings Institution spells out this spend-and-tax problem with great clarity. Under current spending trends, tax-the-rich efforts to bring the deficit to just 3 percent of GDP -- not balance, mind you, but 3 percent deficit -- would require a nearly 80 percent marginal tax rate on the most successful earners. And if taxes are raised across-the-board, the marginal rate would rise to nearly 50 percent for the top earners, with state and local tax burdens bringing it up to 60 percent. Otherwise, a European-style value-added tax (VAT) would become necessary.

The tea partiers know this and they don’t like it one bit. And so, at bottom, they have formed a constitutionalist movement to revolt against big government and big taxes -- and oh, by the way, to stand against big-government control of large chunks of the economy, such as energy and health care.

Harking back to the Founders’ principles of constitutional limits to government is a very powerful message. It’s a message of freedom, especially economic freedom. The tea partiers have delivered an extremely accurate diagnostic of what ails America right now: Government is growing too fast, too much, too expensively, and in too many places -- and in the process it is crowding out our cherished economic freedom.

It’s as though the tea partiers are saying this great country will never fulfill its long-run potential to prosper, create jobs, and lead the world unless constitutional limits to government are restored.

Now, as the tea partiers rally across the country, the big question is only this: Will the political class get it?

Last night, on the eve of Tax Day, I spoke with Sen. Judd Gregg, (R-N.H.) and Sen. Ron Wyden, (D-OR) about their bipartisan tax reform proposal. It's a huge business tax cut, with some flattening of tax-rates and simplification. Take a listen.

Wednesday, April 14, 2010

Here are the clips from last night's historic interview with two powerhouse economic thinkers, both former economic advisors to Ronald Reagan. Joining me on set were Nobel Prize winning economist and Columbia economics professor Robert Mundell, as well as the Laffer Curve's very own Arthur Laffer. What a great privilege and honor.

Tuesday, April 13, 2010

In the spirit of tax week, here's a terrific video hosted by my old friend Dan Mitchell showing how a flat tax would benefit American families and businesses. It also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code.

Thomas Hoenig, head of the Kansas City Reserve Bank, is truly a new Fed superstar. I encourage all of you to read his recent speech in Santa Fe, New Mexico, where he calls for an immediate tightening of the federal funds target rate to 1 percent in order to prevent the build-up of financial imbalances that could create another credit-bubble boom that in turn will wind up as another credit-and-financial bust.

In other words, get ahead of the curve, instead of staying behind it. Slam down the threat of future inflation. To use Mr. Hoenig’s words, put the market on notice that it must again manage its risk, and be accountable for its actions. Stop relying on the Fed’s easy money. What great advice.

I’d like to go a couple steps further. First, the biggest problem with the Fed’s easy money in the 2002-05 period — which set the stage for the boom-and-bust cycle — was that rates were held too low for too long. In those days, Alan Greenspan called it a “considerable period.” Today it’s called an “extended period.”

Second, the Fed back then had something called a slow, measured pace. Remember that? That meant the Fed was telegraphing to Wall Street these small, teensy-weensy, incremental, quarter-percent increases in the fed funds rate. That, of course, meant it took the Fed several years to get back to normalcy. And it promoted excessive leverage and risk-taking.

I want a different regime. I’m calling it cowboy monetarism. What do I mean by that? I want Wall Street to be scared to death of the Federal Reserve. I don’t want them lying around in bed with the Fed — I want them running scared.

Let me give you an example: Back in the 1980s, Ronald Reagan was often referred to as a cowboy in his tough dealings with the Soviet Union. Well, guess what? As we learned later, the Soviets were in fact very scared of Reagan’s toughness in the Cold War fight against communism. So I want Wall Street to be just as afraid of the Fed as the Soviets were of Ronald Reagan.

And when the Fed does finally move — and it ought to move soon, as Mr. Hoenig says — it shouldn’t do so in a teensy-weensy, quarter-point manner. It shouldn’t tell Wall Street what it’s doing every minute of every hour. It should surprise the Street with large, unexpected rate hikes like 75-basis points, or even 1 percent changes.

This would force curb Wall Street’s propensity for large risky bets. It would keep traders honest. And it would put the kibosh on a new credit boom and bust cycle.

Look, I want the Fed to be thought of as a cowboy; you never know what it’s going to do. Think John Wayne. I want both guns drawn, pulling the interest-rate triggers. If the Fed does that, then it’s possible we can stop another credit bubble.

Volcker did this in the 1980s. He was right. It worked.

Sometimes being tough and unpredictable is the best monetary medicine. Cowboy monetarism. That’s my take.

Friday, April 09, 2010

A blowout retail-chain-store-sales number of plus-10 percent for the year ending March trumped the growing disaster in Greece, with the Dow managing to finish trading yesterday ahead by 30 points. Retail stocks were up big across-the-board. So far this morning, the Dow has tacked on another 40 points.

Bottom line: This big retail number confirms my view that the economy is actually much stronger than most people think.

We’ve got a V-shaped commodity boom; a V-shaped retail-sales and retail-stock boom; a V-shaped profits boom; a V-shaped ISM boom; and the beginnings of a V-shaped jobs recovery. I don’t know how long all this will last, but the next 6 to 9 months look pretty darn good on the economic front.

On the negative side, the Greece story has disaster written all over it. The bond market vigilantes are issuing yet another wake-up call. A run on the Greek banks is developing, and the overnight repo funding market in Greece is dead.

The question now is whether Greece will ultimately default. And there’s also a contagion question at play. And what about all the French banks that own the Greek bonds?

On a more positive note, at least the prospects for a China trade war seem to be diminishing, with Treasury man Tim Geithner’s renminbi diplomacy in Beijing. No one really knows for sure if the Chinese will in fact revalue their currency, or, as investor Jim Chanos worries, whether China is facing a prosperity boom and real-estate property bubble that may sink its banks if it goes bust.

But one thing is for sure: Right now, the U.S. economy is outperforming everybody’s expectations.

- Diana Furchtgott-Roth, director of the Center for Employment Policy at the Hudson Institute; former chief economist, Dept of Labor- Teresa Ghilarducci, The New School for Social Research Economics Professor

Sometimes you have to take your political lenses out and look at the actual economic statistics in order to gauge whether we’re on the road to recovery or not. Without getting personal, I’m watching many of my friends on certain cable stations attempt to trash the March employment numbers released last Friday. Don’t do it, folks. The numbers were solid.

In fact, while everyone keeps saying that small businesses are getting killed from taxes and regulations out of Washington, the reality is that the Labor Department’s household survey has produced 1.1 million new jobs in the first quarter of 2010, or 371,000 per month. If that continues, the unemployment rate will be dropping significantly.

Additionally, the corporate payroll number increased by 224,000 — not 162,000 — with the prior two months being revised up by 62,000. And if you take out the 48,000 temporary census-worker jobs, it turns out that government employment actually declined in March.

What’s my point? Credibility. Conservative credibility.

No one has written more about the future tax-and-regulatory threats from the big-government assault of Obamanomics. But most of that is in the future. The current reality is that a strong rebound in corporate profits (the greatest and truest stimulus of all), ultra-easy money from the Fed, and some very small stimuli from government spending are all working to generate a cyclical recovery in a basically free-market economy that is a lot more resilient than capitalist critics would have us believe.

So conservatives should not lose their cool and blow their credibility over a cyclical rebound that is backed by the statistics.

Incidentally, the real-time ISM purchasing-managers reports for manufacturing and services show that the next few quarters, perhaps to year end, could be much, much stronger than the consensus expects. Higher future tax rates are going to be a problem. But then again, the tea-party revolution may overturn all those obstacles to growth. Think of it.

Thursday, April 01, 2010

In some sense, I’m glad President Obama is opening the door to offshore oil drilling. But in the spirit of free-market deregulation, I do think that much, much more should be done in the Atlantic, the Gulf of Mexico, the Pacific, and Alaska.

With oil prices high, and new technologies coming on stream daily, drillers and producers have tremendous incentives to generate much more oil and gas. If only we let them.

It goes without saying that a growing economy needs more fuel. That’s why I want to deregulate the entire energy industry. I’ve called for this countless times over the years. We need to remove government obstacles for oil, gas, clean coal, nuclear, and the so-called renewable green-energy sources.

And yes, I oppose government subsidies of any kind. Let the marketplace decide what makes profitable economic sense.

As for offshore oil drilling, get this: By some estimates, the U.S. has 86 billion barrels of oil reserves offshore. For some perspective, that’s enough energy to fuel 65 million cars for 47 years. That’s why the stakes are so high.

Those reserves will give us plenty of time to transition into the development of nuclear power and natural gas for the home and highway. Of course, millions of American jobs would be created in the process. This power can fuel tremendous economic prosperity for years to come.

On a related note, this so-called tri-partisan Senate cap-and-trade bill is a far cry from free-market capitalism. In my view, if this legislation is put in place it could spell economic disaster. In fact, a new study by the Heritage Foundation estimates that the new cap-and-trade bill from Sens. Lindsey Graham, John Kerry, and Joe Lieberman could reduce GDP by as much as $10 trillion over the next two decades. It could force $4.6 trillion in new energy taxes on Americans, kill 2.5 million jobs, and raise the cost of goods and services by $3,000 a year.

Is that what we want?

More government controls like this are exactly the wrong energy medicine. Let the market work, I say. Use all of our resources, all of our technology, and all of our wealth.

Look, if you really believe in this man-made-global-warming carbon problem -- which I do not --then here’s a response that’s much more efficient than government controls and subsidies: Put a tax on carbon. Then legislate that all those carbon-tax revenues be recycled in the form of lower marginal tax rates for all individuals, families, and businesses, and finance true, single-rate, flat-tax reform. That’s what you do if you buy into the man-made carbon problem.

But most of all, let’s liberate the great American energy sector from the shackles of government control. Energy freedom and economic freedom should go hand and hand. This is part of our history. True energy freedom will help resurrect our economy by providing the fuel to power American prosperity for as long and as far as the eye can see.

About Me

Larry Kudlow

Lawrence Kudlow is CNBC’s Senior Contributor. For many years, he was the host of CNBC’s “The Kudlow Report”. He is also the host of The Larry Kudlow Show, which broadcasts on Saturdays from 10am to 1pm ET on WABC Radio and is syndicated nationally by Cumulus Media. He is also a nationally syndicated columnist and a former Reagan economic advisor. CNBC's The Kudlow Report also airs on Sirius (ch.129) and XM (ch.127) weeknights at 7pm ET.